Key Takeaways
Looking back over the past 40 years, the average interest rate on a 30-year mortgage peaked at about 16% in 1981. The average interest rate on a 30-year mortgage bottomed out at just under 3% in 2021. Today, the cost of a typical 30-year mortgage is similar to interest rates in the late 1990s, in the 7% range.
Mortgages as we know them today are less than a century old. In fact, only one in ten Americans owned their home before the Federal Housing Administration (FHA) was created in 1934. That all changed during the Great Depression, when the 30-year fixed-rate mortgage was introduced, putting homeownership within the reach of millions.
Trends in mortgage interest rates
Trends in mortgage interest rates in the 1970s
According to Freddie Mac, the most popular mortgage today, the 30-year fixed-rate mortgage, began life in 1971 at about 7.3%. By the end of 1979, the 30-year rate was 12.9%. During that decade, the Federal Reserve's expansionary policies and other factors caused inflation and borrowing costs to rise significantly.
Trends in mortgage interest rates in the 1980s
According to the Department of Housing and Urban Development (HUD), in the early 1980s, the average price of a home in the United States was $63,700. By 1990, that average had risen to $123,900. Spurred by the Great Inflation, 30-year fixed mortgage rates peaked at 18.4% in October 1981, according to Freddie Mac. After the Fed curbed inflation, 30-year rates fell to the 9% range, finishing the decade at 9.78%.
Trends in mortgage interest rates in the 1990s
The 1990s saw 30-year interest rates change dramatically, plummeting to an average of 6.91 percent in 1998, according to data from Bankrate. The drop was driven by the dot-com bubble, a time when investors rushed to buy shares in overvalued technology companies. When those stocks plummeted, investors shifted their focus to fixed-income investments like bonds. As bond prices rose and yields fell, mortgage rates, which are tied to the 10-year Treasury yield, also fell.
Trends in mortgage interest rates in the 2000s
When the subprime mortgage crisis caused the housing market to implode in the late 2000s, 30-year rates fell again. The average rate on a 30-year fixed mortgage fell to 5.4% in 2009 from about 8% at the start of the decade, according to data from Bankrate. That's when the Federal Reserve implemented quantitative easing, buying large amounts of mortgage-backed securities to lower interest rates and spur an economic recovery.
Trends in mortgage interest rates in the 2010s
According to data from Bankrate, 30-year mortgage rates have continued to trend downward in the 2010s, starting in the 4% range, dropping below 4%, then climbing back up to that range to finish out the decade. These low rates are due in part to the Federal Reserve tapering its bond purchases.
Mortgage interest rate trends for the 2020s
Mortgage rates hit record lows in 2020, with 30-year fixed rates dropping just below 3% to an annual average of 3.38%, according to data from Bankrate. Amid the pandemic, anxious investors gravitated toward safer products like Treasury bonds and mortgage-backed securities, driving down yields and interest rates.
Mortgage rates hit record lows in 2020, with 30-year fixed rates dipping just below 3%, averaging 3.38% annually, according to data from Bankrate. Amid the pandemic, anxious investors gravitated toward safer products like Treasuries and mortgage-backed securities, pushing down yields and interest rates. Rates began to rise again in 2021, but the ongoing pandemic ultimately capped any increases.
Then 2022 and 2023 came along. Determined to contain runaway inflation, the Federal Reserve began raising base interest rates, and mortgage rates followed suit. In October 2022, 30-year rates topped 7%, but by the first half of 2023 they were back in the 6% range. By July 2023, rates had reversed course, and by October, 30-year rates had topped 8%. As of early April 2024, the average interest rate reported by Bankrate was 7.05%.
Mortgage interest rate forecast
Although we can make guesses based on historical data, no one knows for sure what mortgage rates will be, if they will change, or when they will change. The economy and housing market are cyclical and go through ups and downs that are sometimes unpredictable. That said, we regularly consult economists and other experts. For weekly predictions, see our Mortgage Rate Survey. For a monthly outlook, see our latest Mortgage Rate Forecast.
Overview: Mortgage interest rates
Over the past 50 years, mortgage rates have experienced peaks and valleys, from a high of 18% in the 1980s to the relatively moderate but somewhat volatile figures of today.
Below is a summary of the average interest rates on 30-year fixed mortgages by year. Since the mid-1980s, the figures reflect Bankrate's calculation of effective mortgage interest rates, which takes into account the average number of points paid by borrowers. Data from the 1970s through the early 1980s is based on Freddie Mac reports.
Year 30-Year Fixed Rate Average Source: Bankrate, Freddie Mac 2023 7.00% 2022 5.53% 2021 3.15% 2020 3.38% 2019 4.13% 2018 4.70% 2017 4.14% 2016 3.79% 2015 3.99% 2014 4.31% 2013 4.16% 2012 3.88% 2011 4.65% 2010 4.86% 2009 5.38% 2008 6.23% 2007 6.40% 2006 6.47% 2005 5.93% 2004 5.88% 2003 5.89% 2002 6.57% 2001 7.01% 2000 8.08% 1999 7.46% 1998 6.91% 1997 7.57% 1996 7.76% 1995 7.86% 1994 8.28% 1993 7.17% 1992 8.27% 1991 9.09% 1990 9.97% 1989 10.25% 1988 10.38% 1987 10.40% 1986 10.39% 1985 12.43% 1984 13.88% 1983 13.24% 1982 16.04% 1981 16.64% 1980 13.74% 1979 11.20% 1978 9.64% 1977 8.85% 1976 8.87% 1975 9.05% 1974 9.19% 1973 8.04% 1972 7.38%
How past mortgage rates affect home buying
Generally, low mortgage interest rates increase demand from homebuyers and can increase individual purchasing power. On the other hand, high interest rates mean higher monthly mortgage payments, which can be a barrier for buyers if they are unable to make the payments. Borrowers with high credit scores, stable incomes, and larger down payments generally qualify for the lowest interest rates.
While you should keep an eye on mortgage interest rates, don't try to time the market or predict what's going to happen. A home is an investment as well as a place to live. Generally, it's best to take out a mortgage when you can afford it and when the time is right.
How past mortgage interest rates affect refinancing
If mortgage interest rates are on the rise, it may not make much financial sense to try to refinance. In general, it's best to refinance if you can shave 0.5 to 0.75 percentage points off your current interest rate and you plan to stay in your home for a longer period of time. If you plan to sell your home in the near future, the costs of refinancing may not be worth it.